Coinciding with His Royal Highness the Gyalsey’s fourth birth anniversary, the Royal Securities Exchange of Bhutan launched the Bhutan Stock Index (BSI) in Thimphu yesterday.
The stock index shows the direction of security price movements and reflects market sentiments.
Market sentiment refers to the overall attitude of investors toward a particular security or financial market.
Chief executive officer of RSEBL, Dorji Phuntsho, said the investors, policymakers, and researchers could use the movement of the index for analysis and study the scenario of the capital market in the country.
The index is expected to recognise broad trends in the market and use it as a benchmark to measure the performance of different economic sectors in the country.
He said that the stock index might not wholly project the economy of the country because some major companies were not listed. “The index will also reflect the impacts of various economic policy changes in the secondary market.”
There are 22 listed companies in RSEBL today.
Moreover, investors could use the index to allocate funds rationally among stock portfolios and evaluate its performance in the market.
Chairman of RSEBL’s board of directors, Karma said that in the past, investors traded shares based on their assumptions that the companies were doing well. However, with the launch of BSL, he said that the investors could trade studying the capital market scenario.
Besides projecting the performances of the capital market, the index also signifies the performance of individual companies.
Dorji Phuntsho said that BSI would serve as a basis for analysing historical performance of the market and assist the prediction of future movement of the stock prices.
He said that BSI would change if there was variation in individual stock prices in the secondary market and corporate actions such as dividends, rights, bonus, buyback, listing, and delisting.
The movement of the index was integrated with the trading system and was developed by RSEBL.
BSI is inclusive of listed securities with its base set on December 31 last year at 1000.
Starting December 31 last year, the highest spike was recorded on January 3 and the highest downfall was noted on January 9.
The rise in the index indicates the increase in prices of most of the securities.
The share prices were found to change because of supply and demand. For instance, If more people want to buy a stock (demand) then the price moves up. Similarly, if more people want to sell a stock the price would fall.
Going by the projection, the overall index signals downward movement after the highest spike.
RSEBL officials said that the trend won’t project the economy of the country because the index has the record of only a month. “With BSI in place, we will be able to study the impact of alteration in corporate actions and government policies on the capital market.”